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A recent study from BlackRock and Human Interest reveals a striking gap in retirement savings between workers with access to employer-sponsored retirement plans and those without. Data show that middle-income employees who lacked workplace retirement benefits saved one-eighth more than those with employer-sponsored retirement plans. And by the time they retire, these workers could have nearly $625,000 less than their counterparts with employer retirement programs. The research also showed that building up emergency savings could prompt employees without workplace retirement plans to save more for retirement.
If you don’t have access to a retirement plan at your workplace, a financial advisor can guide you through different options to achieve your retirement goals.
Research from asset manager BlackRock and 401(k) provider Human Interest examined savings rates and projected savings for American workers earning a median annual income of $60,000. According to their findings, those with access to automated, employer-provided retirement savings tools contributed an average of 7.4% of their salaries. Comparatively, workers without such benefits saved only 0.9% annually.
This eight-fold difference in savings rates creates an equally wide disparity in long-term retirement fund accumulation. The study projects that by age 65, the average worker using their employer’s retirement plan would have accumulated $710,900 toward their retirement. Your counterpart without this benefit would have only $86,500, which is $624,400 less.
Please note that this analysis does not take into account the effects of potential employer matches. In many employer-sponsored plans, employers will match employee contributions up to a specific percentage of the employee’s salary. This benefit can significantly increase the amount of money that goes into a retirement savings account.
An older woman reviewing her retirement savings.
Saving less than 1% annually makes it difficult for most workers to build enough savings for retirement. According to widely used guidelines, the average American needs about 75% of pre-retirement income after leaving the workforce. With only $86,500 in retirement accounts, workers without employment-based savings plans will likely face significant financial shortfalls in their later years.
Deficits of that magnitude can lead to all sorts of undesirable outcomes, including inadequate income, decreased quality of life, and overreliance on government programs in retirement. Access to workplace retirement accounts makes it much easier for employees to save consistently so they can maintain their standard of living after leaving full-time employment. Contact a financial advisor if you need help creating a retirement plan.
News stories about the value of savings tools for building savings indicate that companies can help their employees by offering company-sponsored ways to save. It also suggests some specific recommendations for anyone who wants to enjoy a secure retirement.
To get started, talk to your employer’s human resources department to learn what 401(k) or other retirement plans are available and how to enroll. As this research shows, maximizing these benefits in the workplace can significantly increase your savings.
Even if you don’t have access to workplace retirement benefits, you can take steps to save independently. Anyone can open an IRA and have contributions automatically deducted from their paycheck while enjoying current tax benefits. Even small amounts will add up over time. Also look into other tax-advantaged savings vehicles, such as health savings accounts.
In addition to using tax-deferred savings plans, try to build up some cash reserves for emergencies. BlackRock found that workers with at least $1,000 in emergency savings contributed 70% more to retirement accounts and were much less likely to draw down their retirement funds prematurely.
To further boost your savings program, review your budget and look for areas to cut spending. Allocate those savings to retirement accounts. And gradually increase contributions when possible, such as after a raise. A financial advisor can help you develop a retirement plan that’s right for your goals and circumstances.
A woman calculating how much she has saved for her retirement.
Research from BlackRock and Human Interest indicates that access to retirement savings platforms at work allows average employees to save significantly more for their later years. Without these tools, it is very difficult to accumulate enough funds for a comfortable retirement. This research emphasizes the importance of making the most of any workplace retirement plan available to you. It also reveals the huge positive impact that creating and contributing to an emergency savings account can have on your retirement savings.
Consider working with a financial advisor to review your current retirement savings and create a personalized strategy to help you achieve your goals. Finding a financial advisor doesn’t have to be difficult. SmartAsset’s free tool connects you with up to three vetted financial advisors serving your area, and you can take a free introductory call with your matched advisors to decide which one you think is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s online Retirement Calculator to estimate how much you need to save for retirement and develop a plan to help you reach your goal figure. Consistently contributing to retirement accounts is key.
Keep an emergency fund on hand in case you have unexpected expenses. An emergency fund should be liquid, in an account that is not at risk of significant fluctuations like the stock market. The downside is that inflation can erode the value of liquid cash. But a high-interest account allows you to earn compound interest. Compare savings accounts at these banks.
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